Exhibit 10.7
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE
AGREEMENT (this
"Agreement") is made
on February
28, 2005, between Independence Water Group, LLC, a Virginia Limited
Liability
Company with offices at 3122 Elk Creek
Parkway, Independence,
Virginia
24348 ("Seller"), and Universal Food & Beverage Company of
Virginia, a
Virginia Corporation ("Buyer").
BACKGROUND
A. On November 9, 2001 by Order in the United States Bankruptcy Court
for the Western
District of Virginia,
Roanoke Division (Abingdon), Seller
purchased
certain assets of the Grayson Mountain Water Company, Inc.
(Debtor)
from Robert E. Wick,
Jr., Trustee by way of Deeds to Seller
for
the Real Estate
and Personal Property dated January 2, 2002.
B. As of September
1, 2004 Universal Food & Beverage Company, a
Delaware
Corporation
("Universal"),
of which Buyer is a wholly owned
subsidiary,
entered
into a Management Agreement with Seller (the
"Management
Agreement")
to manage the water
bottling plant and equipment,
buildings,
water
aquifer rights and real estate (collectively the
"Business").
The Management Agreement provides for Buyer and Seller
entering into an
Asset Purchase
Agreement for the purchase of the Business
including
approximately
620 acres of forest
land, water aquifer
rights,
16,000 sq. ft.
bottling facility and distribution space, including a
residence
in Independence, Virginia, with all associated equipment,
materials,
supplies, trademarks and goodwill
(collectively the "Purchased
Assets").
C. On September 27, 2004 Cardinal Minerals, Inc., a Nevada corporation
("Cardinal"),
entered
into a Share Purchase Agreement and Plan of
Reorganization
(the "Reorganization Agreement") with Universal,
for the
exchange of all
the outstanding
shares of Universal
for shares of
common
stock of
Cardinal (the "Share
Exchange"). Upon
consummation of the
Share
Exchange,
Universal will become
a wholly owned
subsidiary of Cardinal and
the shareholders of Universal will become
shareholders of
Cardinal which
will be renamed
"Universal Food & Beverage Company".
AGREEMENTS
NOW, THEREFORE,
in consideration of the Background
and the terms and
conditions
set forth in this
Agreement,
the Seller and Buyer agree as
follows:
1. Assets Purchased. At the Closing, Seller shall sell, assign,
convey,
transfer, set over, and deliver to Buyer all of the assets, rights, and
interests of every conceivable kind or
character whatsoever, whether tangible or
intangible, that on the Closing Date are owned
by Seller or in which Seller has
<PAGE>
an interest of any kind except for Excluded
Assets listed under Section 2. These
include, without limitation, the following
Purchased Assets:
a. All furniture, fixtures and equipment, fixed assets and all
other items of
tangible personal property, in each case wherever
located and whether or not capitalized on Seller's books, including
but
not limited to, the property set forth on Schedule 1A attached
hereto
(the "Personal Property").
b. All good and
saleable inventory
of any kind,
character,
nature or description,
wherever located
including all finished goods,
work-in-process, supplies, raw materials, parts, scraps, containers
and
packaging
materials and
including any consigned inventory (the
"Inventory").
c. All accounts,
chattel paper,
documents, and
instruments,
including all accrued interest receivable and also any security
Seller
holds for the payment thereof generated by the Business (the
"Receivables") and all
of Seller's general
intangibles in
connection
with the Business and, to the extent not otherwise constituting
general
intangibles, any
interest of Seller in any and all
claims by Seller
against any other person in connection with the Business, whether now
accrued or later to accrue, contingent or otherwise, known or unknown,
including, but not
limited to, all rights under express or implied
warranties from
suppliers in connection with the Business (except as
they may pertain to Seller's liabilities other than Assumed
Liabilities), claims for collection or indemnity, claims in
bankruptcy,
and chooses in action.
d. All Seller's right, title, benefit, and interest in and
to
inventions,
discoveries,
improvements, designs,
trade secrets, trade
names, trademarks, process sheets, specifications, bills of material,
formulae and
secret and confidential processes, know-how and
technology, used in
the Business
(the "Intellectual Property") as
listed on Schedule 11.AA.
e. Four (4) tracts or parcels of improved land containing 621
acres more or less
located at 3122 Elk
Creek Parkway,
Independence,
Virginia, legally
described on Schedule
1E attached hereto (the "Real
Estate");
f. The full benefit of:
i. Any and
all purchase orders placed with and
accepted by Seller on or before the Closing Date in connection
with the Business that have not been completely performed or
filled before the
Closing Date,
covering the purchase
from
Seller of products to
be supplied by Seller in the Business,
or covering
the rendition by Seller of service on
products
supplied by Seller in the Business and including all deposits,
progress payments, and
credits of the Business, as set forth
on Schedule 1.F.1;
ii. The purchase
orders listed on Schedule 1.F.2
placed by Seller prior to the Closing Date in connection
with
the Business that have not been completely performed before
2
<PAGE>
the Closing Date,
covering Seller's purchase of inventory,
supplies, or materials in the ordinary course of business; and
iii. The leases of personal property and other
agreements listed in Schedule 1.F.3.
(All the items listed in this Section 1.F are the" Contracts and
Commitments").
g. All records and lists of the Business that pertain directly
or indirectly,
in whole or in part, to any one or more of the
following: the
Seller's Business
customers, suppliers,
advertising,
promotional material, sales, services, delivery, internal
organization,
employees, and operations.
h. All security deposits, prepaid expenses, and similar
items
reflected in the latest of the Financial Statements of Seller referred
to in Section 11.G, in
connection
with the Business, in the amount
accrued as of the Closing Date.
i. All transferable
local, state, and federal franchises,
licenses, bonds,
permits, and similar items pertaining to the Business
and/or the Purchased
Assets, as listed on
Schedule 1I attached hereto
(the "Permits").
j. The Business conducted by Seller as a going concern,
including any and all goodwill, telephone and FAX numbers,
yellow-page
advertisements and P.O. Box if any.
k. To the extent not otherwise specifically included in this
Section or excluded
under Section 2, all assets, rights, claims,
contracts, agreements,
causes of action and properties as of the
Closing Date, of every kind, character, nature and description,
whether
tangible or
intangible,
choate
or inchoate, known or unknown,
contingent or fixed and wherever located.
Seller shall update
all Schedules
described in this
Section 1, where
appropriate, as of the Closing Date.
2. Excluded Assets.
Buyer is not
purchasing any Excluded Assets from
Seller. "Excluded Assets" means:
a. All of Seller's books of account (although copies of such
books and records relating to the Business shall, on reasonable
request
made by representatives of Buyer, be provided to Buyer);
b. Claims for refunds of federal and state income taxes, tax
credits of any kind;
c. Cash or cash equivalents.
3
<PAGE>
3A. Liabilities
Assumed.
Seller
agrees that Buyer assumes no
liabilities of Seller, and Buyer shall not assume any
such liability,
whether
accrued, absolute, contingent, known,
unknown, or otherwise, except for
a. Those liabilities specifically identified as of the Closing
Date on the Closing Date Balance Sheet consisting of all Trade
Payables
(in an amount not to
exceed $40,000 as set forth on the Financial
Statements included
as Schedule
11.G), as may be adjusted, all as
pursuant to Section 4.C, consistent with the accounting done on the
Financial Statements including as Schedule 11.G, incurred in the
normal
course of business;
b. Those liabilities
related to executory obligations of
Seller's continued
performance
arising in the ordinary course of
business under any of
the Contracts
and Commitments of Seller that
become performable or payable on or after the Closing Date.
(All of the items listed in this Section
3.A are "Assumed Liabilities.")
3B. Excluded Liabilities. Notwithstanding the provisions of
Section 3A
the Buyer will not assume or become
responsible
for, and will not be
deemed to
have assumed or have become responsible for, any other obligation or
liability
of the Seller, whatsoever other than as specifically set forth in Section 3A
(with all such unassumed liabilities and obligations referred to herein
collectively as "Excluded Liabilities").
Without limiting the
generality of the
foregoing, the Buyer will not assume or
become responsible for
and will not be
deemed to have assumed or to have become
responsible for:
a. any liability or
obligation arising
prior to, on or after
the Closing Date in connection with any Excluded Asset;
b. any debt to any
bank including but not limited to the
Grayson National Bank;
c. any liability
or obligation of the Seller, any of its
Affiliates or
any of their respective predecessors under any
Environmental Laws
arising out of or in
any way related to any event,
transaction,
condition, practice, release or occurrence on or prior to
the Closing
Date, including but not limited to any liability or
obligation resulting from any violation of Environmental Laws;
d. any liability or obligation (whether assessed or
unassessed) of the Seller or any of its affiliates with respect to any
Taxes, including
any Taxes arising by reason of the transaction
contemplated by this Agreement or the Related Agreement, as of or for
any period prior to, on or after the Closing Date, except for property
taxes specifically
included on the
Financial Statement included as
Exhibit 11.G;
e. any liability or obligation of the Seller to any current or
former employee with respect to worker's compensation claims made
after
4
<PAGE>
the Closing Date by current or former employees of Seller with
respect
to conditions
or occurrences commencing on or prior to the Closing
Date; or
f. any liability or
obligation of the
Seller with respect to
any civil or criminal
litigation,
proceeding,
investigation or claim
relating to or involving allegations of criminal conduct,
civil fraud
or intentional misconduct.
g. product warranty
liabilities, including
product defects,
for products
produced by Seller on
or prior to the
execution of the
Management Agreement.
4. Purchase Price for Purchased Assets.
a. Purchase Price.
The purchase price to
be paid by Buyer to
Seller for the Purchased Assets at the Closing (the
"Purchase Price")
shall be equal to:
(i) $200,000; and
(ii) 2,000,000
Units consisting of one share of
Common Stock ($0.001)
per value per share of
Universal (the
"Common Stock")
and one Warrant to purchase one share of
common stock of Universal (the "Warrants"). The Warrants will
allow Seller to
purchase one (1) share of the Common Stock at
an exercise
price of $1.00
per share for three (3) years
following its issuance. The Units shall consist of the
Common
Stock and the Warrants (the "Units").
The Purchase Price
shall be paid by Buyer in full at
the Closing.
Buyer
shall deliver to Seller the amount
determined under
this Section by cashier's check or wire
transfer at Closing.
Buyer shall
cause to be
delivered at
Closing a share
certificate for
2,000,000 shares of Common
Stock of Universal in the name of Seller which share
certificate will
contain restrictions on transferability.
Buyer shall also cause to be delivered at Closing the Warrants
for the purchase
of 2,000,000 shares of Common Stock of
Universal.
If
the Closing occurs after the Share Exchange, Buyer
shall have the right to deliver and Seller shall accept the
same number of Cardinal shares of common stock and warrants as
Seller would have
received as
consideration of
Common Stock
and Warrants pursuant
to the terms of this Agreement. In the
event Seller receives such Cardinal shares of common stock and
warrants, they shall
be subject to the same
restrictions on
transferability as applied to the Common Stock and Warrants.
b. Allocation of Purchase Price. The Purchase Price shall be
allocated among the
Purchased Assets in accordance with attached
Schedule 4.b.
Buyer and Seller agree to file all tax returns and
reports in a manner consistent with the allocations in this
Section.
5
<PAGE>
5. Related Agreement;
Real Estate Purchase Agreement. The real estate
parcels located at Elk Creek Parkway,
Independence, Virginia
shall be purchased
by Buyer pursuant to an agreement in the
form attached hereto
as Exhibit A (the
"Related Agreement").
6. Delivery Free of
Encumbrances.
Seller shall deliver
good title to
the Purchased Assets free and clear of all
mortgages, liens,
claims, demands,
charges, options, equity interests, leases, tenancies, easements, pledges,
security interests, and other encumbrances ("Encumbrances"), except for any
Assumed Liabilities that results in any
Encumbrance.
7. Preclosing Actions. Before the Closing:
a. Conduct of
Business. Buyer (under
the ongoing
Management
Agreement) shall carry on and conduct the Business only in the
ordinary
course consistent
with past practices, without any change in the
policies, practices,
and methods that Buyer pursued before the date of
this Agreement.
Buyer and Seller will use their best efforts to
preserve the
Business
organization
intact;
to preserve the
relationships with
customers,
suppliers,
and others having
business
dealings with it; and to preserve the services of the workers,
agents,
and representatives.
Without limitation of the foregoing, Seller shall
not undertake any action with respect to the Purchased Assets without
the prior written consent of Buyer.
b. Buyer's Access, Due Diligence Review. From the date of this
Agreement through
the Closing, Seller shall permit Buyer and its
representatives to
make a full business,
financial, accounting,
and
legal audit of Seller,
the Business, the Purchased Assets and the
Assumed Liabilities.
Seller shall take all
reasonable steps necessary
to cooperate with Buyer in undertaking this audit.
c. Accuracy of Representations and Warranties and Satisfaction
of Conditions. Seller
will immediately
advise Buyer in writing if (i)
any of Seller's
representations or
warranties are untrue or incorrect
in any material
respect or (ii) if Seller becomes aware of the
occurrence of any event or of any state of facts that results in
any of
the representations
and warranties of Seller being untrue or incorrect
as if Seller were then making them. Seller will not take any
action, or
omit to take any action, that would cause any of Seller's
representations and warranties set forth in this Agreement to be
untrue
or incorrect as of the Closing Date. Seller will use its best
efforts
to cause all
conditions within
their control that are set forth in
Section 8 to
be satisfied as promptly as practicable under the
circumstances.
8. Conditions Precedent to Buyer's Obligations. Buyer's obligation to
consummate the transactions contemplated by this Agreement is subject to
the
fulfillment (or waiver by Buyer) before or at the Closing of each of the
following conditions:
a. Accuracy
of Representations and Warranties. The
representations and
warranties of Seller
contained in this
Agreement
and the Related
Agreement shall be true and correct at and
as of the
6
<PAGE>
Closing Date as though such representations and warranties were
made on
that date.
b. Performance
of Covenants. The Seller shall have in all
respects performed and
complied with all
covenants, agreements,
and
conditions that this Agreement and all related documents require to be
performed or complied with before or on the Closing Date,
specifically
including the Related Agreement referred to in Section 5.
c. Results of Due Diligence Review. Buyer shall be satisfied,
in its sole and
absolute discretion, with the results of its due
diligence review of the Seller, the Business, the Purchased Assets and
the Assumed liabilities conducted as contemplated in Section 7b,
above.
d. Permits.
Buyer shall have
received all permits that in
Buyer's opinion
are necessary to operate the Business after the
Closing.
e. No Casualty. Prior
to the Closing Date,
Seller shall not
have incurred, or be
threatened with, a material liability or casualty
that would materially impair the value of the Purchased Assets.
f. Opinion of Counsel. Buyer shall have received the favorable
opinion of Seller's
counsel dated the Closing Date and in form and
substance satisfactory
to Buyer's
counsel. The opinion shall be in
substantially the form attached as Schedule 8. F.
g. Instruments
of Transfer, etc. Seller and Buyer shall
prepare and deliver to Buyer, in form and substance satisfactory to
Buyer, all bills of sale, general instruments of transfer,
conveyances,
assurances, transfers, assignments, approvals, consents, and any
other
instruments and documents containing the usual and customary
covenants
and warranties of
title and that shall be convenient, necessary, or
required to
effectively transfer
the Purchased
Assets to Buyer
with
good title, free and clear of all Encumbrances.
h. Certificates Regarding Conditions Precedent. Seller Parties
shall have delivered to Buyer certificates of the Seller,
in form and
substance satisfactory to Buyer, certifying that as of the Closing
Date
all of the conditions
set forth in this Section, except those totally
within the Buyer's control, have been satisfied.
i. No Litigation. No action, suit, proceeding, or
investigation
shall have
been instituted before any court or
governmental body, or
instituted by any
governmental agency,
(i) to
restrain or prevent the carrying out of the transactions contemplated
by this Agreement,
or (ii) that might
affect Buyer's right to own,
operate, and control the Purchased Assets after the Closing
Date.
7
<PAGE>
j. Lien Search. Buyer shall have received UCC lien searches on
the Purchased Assets in form and content satisfactory to Buyer, and
all
matters arising
from such searches shall have been resolved or
addressed in a manner satisfactory to Buyer.
k. Consents.
Seller shall have obtained, in writing, all
consents
necessary or
desirable to consummate or to facilitate
consummation of this
Agreement and any related transactions. The
consents shall be
delivered to Buyer before Closing and shall be
reasonably acceptable to Buyer in form and substance.
l. Environmental Investigation. Buyer shall have received, at
its cost and expense, Phase I Environmental Site Assessment
prepared by
an independent, competent, and qualified environmental consultant,
that
in its scope, form,
and substance is satisfactory to Buyer on all real
estate being
either purchased or leased under the terms of this
Agreement or any Related Agreements. Buyer shall also receive, at
its
cost and expense, any updates it deems necessary or appropriate.
Buyer
shall be satisfied,
in its sole and
absolute discretion,
that there
will not be at and after the Closing any basis for the
imposition
on
Buyer of any liability
under any Environmental Laws (as defined in
Section 11.T.1).
m. Conditional
Tax Clearance.
Seller shall have
provided to
Buyer a certificate
of conditional tax clearance from the Revenue
Commissioner of the
Commonwealth of
Virginia showing that
Seller has
filed all tax returns and reports required to be filed before
Closing
and that it has paid all taxes due.
n. Real Estate
Appraisal and Well
Survey. Buyer shall have
received, at its cost
and expense, a study
relating to the
continued
suitability of the water resources and real estate value.
Buyer shall
be satisfied, in its
sole and absolute
discretion, that there
are no
issues relating
to the continued use and availability of water
resources on the real
estate and the value of the real
estate as an
asset of the Business.
o. Board Approval.
The Board of Directors
of the Buyer shall
have taken the necessary Board action approving this transaction. The
Members of Seller
have taken all necessary action approving this
transaction.
p. Other Documents and Instruments. Buyer shall have received
such other documents and instruments as it has reasonably
requested, in
form and
substance satisfactory to Buyer.
q. Approvals
by Buyer's Counsel. Buyer's counsel shall
reasonably approve all
legal matters and the form and substance of all
documents that Buyer or Seller are to deliver at the Closing.
r. Buyer's Financing.
Buyer shall have obtained satisfactory
financing, as determined in Buyer's sole and absolute
discretion.
8
<PAGE>
9. Conditions Precedent to Seller's Obligations. Seller's obligations
to consummate the transactions contemplated
by this Agreement are subject to the
fulfillment of each of the following
conditions before or at the Closing Date:
a. Accuracy
of Representations and Warranties. Buyer's
representations and
warranties
contained in this
Agreement and the
related Agreement
shall be true and
correct at and as of
the Closing
Date as though such
representations and
warranties
were made at the
Closing.
b. Performance of Covenants. Prior to and at the Closing Date,
Buyer shall
have in all
respects performed and complied with its
obligations under all
the covenants,
agreements, and
conditions that
this Agreement and the Related Agreement require.
c. Board Approval.
The Board of Directors
of the Buyer shall
have taken the necessary action approving this transaction. The
Members
of Seller have taken all necessary action approving this
transaction.
d. Consents.
Seller shall have obtained, in writing, all
consents
necessary or
desirable to consummate or to facilitate
consummation of the Agreement and any related transactions.
e. Opinion
of Counsel. Seller shall have received the
favorable opinion of Buyer's counsel dated the Closing Date and in
form
and substance satisfactory to Seller's counsel. The opinion shall
be in
substantially the form attached as Schedule 9.F.
f. Approvals
by Seller's
Counsel. Seller's counsel shall
reasonably approve all
legal matters and the form and substance of all
documents that Buyer or Seller are to deliver at the Closing.
10. Closing
Matters.
a. Closing. The
closing of the
transactions
contemplated in
this Agreement
(the "Closing") shall take place at the offices of
Chicago Title
Insurance Company,
Washington,
D.C., at 10:00 a.m.
on
March 1, 2005 or at such other place and/or on such other date as
the
parties may agree upon (the "Closing Date").
b.
Updated Schedules. At
the Closing, certain
Schedules will
need to be up-dated to the day of Closing.
c. Certain Closing Expenses; Prorations. Buyer shall be liable
for and shall pay all federal, state, and local sales, use, excise,
and
documentary stamp
taxes and all other
taxes, duties, or other like
charges properly payable on and in connection with Seller's
conveyance
and transfer of the Purchased Assets to Buyer.
9
<PAGE>
d. Deliveries at the Closing. At the Closing, (i) Seller shall
deliver the
various bills of sale, all other assignments and
instruments of transfer and Certificates, documents or items referred
to in this Agreement, including Section 8, and (ii) Buyer shall
deliver
the various Certificates, documents or items, and the payments
referred
to in this Agreement, including Section 4.a. and Section 9.
e. Further Assurances.
Seller shall cooperate with and assist
Buyer with the transfer of the Purchased Assets under this Agreement
and take all other
reasonable actions to
assure that the
Business is
smoothly transferred
to Buyer. From time to time after the Closing
Date, Seller shall, at
the request of Buyer,
execute and deliver such
additional conveyances, transfers, documents, instruments,
assignments,
applications,
certifications,
papers, and other assurances that Buyer
requests as necessary, appropriate, convenient, useful or desirable
to
effectively carry out
the intent of this Agreement and to transfer the
Purchased Assets to Buyer.
11. Seller
Representations
and Warranties. As of the date of this
Agreement and as of the Closing,
the Seller
represents
and warrants to
Buyer,
and acknowledges and confirms,
that Buyer is relying
on these
representations
and warranties in entering into this
Agreement.
a. Organization and
Standing. Seller is a
limited liability
company duly organized, validly existing, and in good standing under
the laws of the Commonwealth of Virginia, and Seller has all requisite
power and authority (corporate and otherwise) to own its properties
and
conduct its business
as it is now being
conducted. The nature
of the
business and the character of the properties Seller owns or leases do
not make the licensing or qualification of Seller as a foreign
corporation necessary
under the laws of any other jurisdiction except
as may be listed on Schedule 11.A. Seller has not used or assumed
any
other name in
connection with the
conduct of the Business during the
last two years, except as provided in Schedule 11.A.
b. Authorization. Seller has all requisite power and otherwise
requisite legal
capacity (i) to execute, deliver, and perform this
Agreement and the
Related Agreement to
which each is a party and (ii)
to consummate the
transactions
contemplated under
this Agreement and
the Related Agreement. Seller has taken, or will have taken at the
time
of the Closing, all
necessary corporate action (including the approval
of its board of
directors and
members) to approve the execution,
delivery, and
performance of this Agreement and the Related Agreement
to be executed
and delivered by it and the consummation of the
transactions contemplated in this Agreement. This Agreement is, and
the
Related Agreement
when executed and
delivered by the parties to them,
will be legal, valid, and binding obligations the Seller,
enforceable
against it in
accordance with the
Agreement and Related Agreement
respective terms,
except as such enforcement may be limited by
bankruptcy,
insolvency,
moratorium,
or similar laws
relating to the
enforcement of
creditors' rights and
by general principles
of equity
(regardless of
whether such enforceability is considered in a
proceeding at law or in equity).
10
<PAGE>
c. Existing Agreements and Governmental Approvals.
i. Except as provided in Schedule 11.C, the
execution, delivery, and performance of this Agreement and the
Related Agreement and
the consummation
of the transactions
contemplated by them:
1. Do not and will not violate any
provisions of law
applicable to any of
Seller, the
Business, or the Purchased Assets;
2. As of the Closing,
does not and will not
conflict with, result in the breach or termination of
any provision
of, or constitute a
default under (in
each case whether with or without the giving of
notice or the lapse of time or both) Seller's
Articles of
Association or Operating Agreement, or
any indenture,
mortgage, lease,
deed of trust,
or
other instrument,
contract, or agreement or any
order, judgment,
arbitration
award, or decree to
which Seller
is a party
or by which it is bound
(including,
without
limitation, the
Purchased
Assets); and
3. Do not and will not result in the
creation of
any Encumbrance on any of Seller's
properties, assets, or
Business (including,
without
limitation, the Purchased Assets).
ii. No approval,
authority, or consent of, or filing
by Seller with, or
notification to, any
federal, state,
or
local court,
authority, or governmental or regulatory body or
agency or any other corporation, partnership, individua
